Meta Platforms: Aiming for the $3 Trillion Club by 2028 with AI Innovation

At the beginning of 2022, Apple (NASDAQ: AAPL) made history as the first company to achieve a $3 trillion market valuation. Just ten years ago, the same company was valued at $600 billion – a figure that many believed was already too high. Today, however, Apple is not alone; Nvidia (NASDAQ: NVDA) and Microsoft (NASDAQ: MSFT) have also surpassed the $3 trillion mark, and we might see more companies join this elite group soon.

The AI Connection of the $3 Trillion Club

The common thread among these top-tier companies is their strong ties to the growth of artificial intelligence (AI). Future contenders for the $3 trillion valuation will likely benefit from the increasing demand and utilization of AI technology in both business and daily activities. Among these, Meta Platforms (NASDAQ: META) stands poised for significant growth due to its substantial investments in AI, which might see its stock value double, enabling it to reach a $3 trillion market cap by 2028.

Image source: Getty Images.

AI Enhancing Meta’s Business Model

For years, Meta’s operations have relied heavily on AI, specifically through their content recommendation algorithm. This technology decides which posts, videos, or ads users see, optimizing for engagement based on individual preferences. With recent advances in large language models, Meta is refining its approach to create a more unified recommendation system, enhancing both efficiency and user experience.

The rise of generative AI allows Meta to revolutionize how marketers create ads. It can generate countless ad variations and determine the best-performing versions to optimize ad spending. CEO Mark Zuckerberg envisions a future where advertisers can simply provide their objectives and budgets, leaving the intricate details to Meta’s technology. This simplification could enable more small businesses to tap into advertising avenues on Facebook and Instagram, driving substantial revenue growth.

Additionally, Meta introduced features allowing businesses to create AI chat agents for platforms like WhatsApp and Messenger, paving the way to monetize its messaging services through improved customer interaction.

Generative AI also encourages user-generated content. With AI features that allow users to share AI-created images on their social feeds, Meta is fostering engagement and community interaction on a larger scale.

In summary, AI advancements are set to boost engagement across Meta’s platforms, enhance monetization, and streamline operations, leading to improved financial outcomes such as revenue growth and increased profit margins.

Meta’s Path to $3 Trillion

Currently, Meta’s market cap is just under $1.5 trillion. To achieve a $3 trillion valuation by 2028, its stock needs to deliver compound annual returns of about 20%—a target that appears attainable with AI as a growth engine.

Analysts are predicting a 15% revenue increase next year. If Meta can sustain this growth for three years, it will be substantially closer to the $3 trillion mark.

In the short term, Meta’s heavy investments in AI will press its operating margin due to rising depreciation costs. However, as the company scales and stabilizes, these costs will lessen. Importantly, since depreciation is a non-cash expense, Meta’s free cash flow will remain robust, enabling stock buybacks, ultimately fostering earnings growth and supporting a higher earnings multiple.

Meta’s shares currently trade at 22.5 times projected 2025 earnings, whereas competitors like Apple, Microsoft, and Nvidia trade at 31.6, 32.5, and 32.6 times, respectively. If Meta’s valuation gradually rises toward the mid-20s as it reports strong financials and engages in stock buybacks, the resulting returns could push it past the $3 trillion threshold.

While reaching this milestone is not guaranteed, Meta’s commitment to AI innovation places it in a strong position for growth, particularly considering its current stock pricing.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, holds a position on The Motley Fool’s board. Adam Levy has investments in Apple, Meta Platforms, and Microsoft. The Motley Fool recommends Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool also recommends certain options on Microsoft. A disclosure policy is in place.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.